Does Zumiez (ZUMZ) Q4 View Signify a Strong Holiday Season?

Zumiez Inc. ZUMZ is one the few retailers that are displaying robust quarterly reports and solid comparable store sales (comps) trend. Notably, the company has delivered positive comps trend for eight consecutive months, which carried forward in November. This along with solid merchandise strategies, integrated sales channels and superb sales team make the company confident of delivering a strong holiday season while posting fabulous earnings growth in the fourth quarter. Consequently, it provided an encouraging guidance for fourth-quarter fiscal 2017.

The company expects net sales for the quarter in the $291-$297 million range, while comps growth is anticipated in a range of 3-5% growth. Notably, the company sales projection lies ahead of the Zacks Consensus Estimate of $287.6 million.

Gross margin for the quarter is anticipated to increase in a band of 20-50 basis points, while consolidated operating margins are projected to range from 10.5-11%. Consequently, the company projects earnings of 78-84 cents per share, which is likely to witness significant growth from the year-ago quarter earnings of 74 cents. Moreover, mid-point of the company’s earnings per share guidance is almost in sync with the Zacks Consensus Estimate of 80 cents per share.

Further, the company revealed that results for the fourth quarter and fiscal 2017 are projected to gain from the inclusion of an additional 53rd week this year.

Fiscal 2017 View

Apart from the fourth-quarter view, the company also outlined some forecasts for fiscal 2017. The company expects the inclusion of the additional week to benefit sales by nearly $9 million and earnings per share by about 5 cents in fiscal 2017. However, this is likely to negatively impact earnings and sales growth in fiscal 2018.

Additionally, the company the company estimates effective tax rate of 38% and shares outstanding of nearly 25 million in fiscal 2017. It also anticipates fiscal 2017 capital expenditures in a range of $24-$26 million, which will be primarily used for new store openings and planned remodels. Depreciation and amortization is anticipated to be $27 million, flat with the prior year.

The company also remains on track to open a total of 19 new stores in fiscal 2017, including five in Europe, two in Australia and three in Canada. Of these, the company has opened 18 stores year to date. This leaves the company with the target of opening just one store in the fiscal fourth quarter.

Stock Performance

Though the company’s shares plunged nearly 9% on the day following the earnings release, it has gained a significant 59% in the last three months. This also marks an outperformance compared with the industry’s growth of 23%.

Rightly, the stock currently carries a Zacks Rank #2 (Buy). Furthermore, a VGM Score of B highlights its growth prospects.

Buckle has delivered positive earnings surprise of 3.8% in the trailing four quarters. Further, the stock has returned 48.7% in the last three months.

Urban Outfitters has gained nearly 43.3% in three months. Moreover, it has a long-term earnings growth rate of 11.5%.

American Eagle has improved 26.4% in the last three months. Further, the company has a long-term EPS growth rate of 8.7%.

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